By Simon Johnson
Congressional Republicans are apparently intent on a big showdown with Elizabeth Warren, who is currently building up the new Consumer Financial Protection Bureau (CFPB).
This is very good news for the White House, if they use this opportunity wisely.
Some Republicans seem to think that Ms. Warren is about “big government” or “intrusive regulation”. But this is not the case – Elizabeth Warren’s approach is much more appealing and already popular with almost everyone on right and left: Transparency.
Look carefully at Ms. Warren’s September speech to the Financial Services Roundtable and think about how this plays as a broader political message.
Her political principle is clear and completely compelling:
““…the best way, in my view, to strengthen those middle class families is to find solutions that are deep and lasting, that strengthen the markets, and that will create a robust, competitive consumer credit industry that works for families, not against them.”
Her economic approach is also right on target – the market should work for the consumer:
“I come to Washington as a genuine believer in markets and a genuine believer that the purpose of regulating the consumer credit market is to make that market work for buyers and sellers alike: a level playing field where the best products at the best prices win. When it works, the market is an ally to consumers. And, when it works, the market rewards those lenders who offer the best value to their customers.”
“When I talk about functioning markets, I’m not using the word “market” as coded
language for a return to the Wild West where companies use deception to pick off every consumer they can get in their sites. A free market is one where consumers have the ability to make well‐ informed choices, where the choices are visible and the terms are clear, and where there are cops on the beat to make sure that everyone plays by the same rules.”
In other words: stop already with the cheating of people. This is not good for our economy, not good for business as a whole, and definitely not good for American families.
“But credit agreements have gotten long and complicated. In fact, there’s a new epithet: fine print. I understand that some of you call it “mice type.”Where I come from, nobody calls fine print, hidden fees and surprise penalties “negotiated contract terms” or “innovations.” On a polite day, my brothers in Oklahoma call that kind of stuff “garbage.””
This is the specific deliverable: Get rid of the fine print.
“An AARP poll earlier this year showed that 96 percent of Americans over 50 surveyed want to put an end to the fine print in their credit agreements. Just in case you missed the point, 91 percent felt strongly about that. 96 percent? These are your customers.”
And they vote. This is exactly the terrain onto which the White House should seek to shift the political debate.
Don’t play the Republicans’ game by agreeing to debate “big” vs. “small” government. This is a complete illusion – just watch the favors that businesses will seek from Republicans on the Hill; not all of these appear “on the government’s balance sheet”, to be sure, but you can talk to the anguished people of Ireland about how exactly supposedly “pro-business” (and definitely pro-big bank) policies end up costing the taxpayer a lot of money. (Or just look at how the financial disaster of 2008-09 ended up costing us 40 percentage points of GDP, measured in terms of the increase in our national debt – directly because of how the financial sector ran its customers and itself into the ground.)
The political debate should begin with documenting business practices that are misleading and duplicitous, wherever they occur.
We need transparency and accountability in the financial sector – and in all other parts of our economy. Elizabeth Warren is exactly the right person to lead this charge, in the first instance from the CFPB.
She should be nominated by President Obama to head the agency. The fight for her confirmation would make her ideas clear to millions. Let’s see which senators exactly are willing to argue against greater transparency.